We’re Watching These Trends At Jinxin Fertility Group (HKG:1951) – Simply Wall St

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Having said that, from a first glance at Jinxin Fertility Group (HKG:1951) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Jinxin Fertility Group:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) (Total Assets - Current Liabilities)

0.042 = CN361m (CN9.2b - CN611m) (Based on the trailing twelve months to June 2020).

Thus, Jinxin Fertility Group has an ROCE of 4.2%. In absolute terms, that's a low return and it also under-performs the Healthcare industry average of 9.8%.

View our latest analysis for Jinxin Fertility Group

Above you can see how the current ROCE for Jinxin Fertility Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

In terms of Jinxin Fertility Group's historical ROCE movements, the trend isn't fantastic. To be more specific, ROCE has fallen from 21% over the last three years. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. If these investments prove successful, this can bode very well for long term stock performance.

In summary, despite lower returns in the short term, we're encouraged to see that Jinxin Fertility Group is reinvesting for growth and has higher sales as a result. Furthermore the stock has climbed 12% over the last year, it would appear that investors are upbeat about the future. So while the underlying trends could already be accounted for by investors, we still think this stock is worth looking into further.

If you want to continue researching Jinxin Fertility Group, you might be interested to know about the 1 warning sign that our analysis has discovered.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. *Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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We're Watching These Trends At Jinxin Fertility Group (HKG:1951) - Simply Wall St

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